Court File and Parties

Court File No.: 33-2031517 Date: 2019/05/02 Ontario Superior Court of Justice in Bankruptcy and Insolvency

In the Matter of the Bankruptcy of Troy Berthiaume Of the City of Ottawa, in the Province of Ontario

Before: Mr. Justice Stanley J. Kershman

Heard in Ottawa: December 7, 2018 and March 4, 2019

Appearance: Shelby Dippold, Counsel for Troy Berthiaume Valerie Bruneau for Ginsberg Gingras & Associates, Inc. Trustee in Bankruptcy Scott Lafrange, Self-Represented Graham Wheatley, Self-Represented

Reasons for Decision

Introduction

[1] Troy Berthiaume (the “Bankrupt”) seeks a discharge from his bankruptcy, which is opposed by the following parties:

• Ginsberg Gingras & Associates, Inc. (the “Trustee”); and
• Scott Lafrange and Graham Wheatley (collectively known as the “Opposing Creditors”).

Factual Background

[2] The Bankrupt is 39 years of age and has been a mason for 16 years. He filed for bankruptcy on September 1, 2015. At that time, he owned T. Berthiaume Masonry Ltd., which was also in financial difficulty and which filed for bankruptcy shortly after Mr. Berthiaume with the same Trustee.

[3] In his Statement of Affairs, the Bankrupt says that the cause of his bankruptcy was “business failure.”

[4] The Bankrupt listed unsecured creditors with claims totalling $546,636.00. The proven unsecured claims filed to date total $140,172.00.

The Trustee’s Opposition to Discharge

a) Trustee’s Original Report

[5] The Trustee submitted a report dated November 20, 2018, and opposed the Bankrupt’s discharge for the following reasons:

1. There was a balance of $1,600.00 owing pursuant to an agreement between the Trustee and the Bankrupt;
2. The amount of surplus income requirements might change depending on the Bankrupt’s income;
3. The Bankrupt failed to provide the Trustee with his spouse’s Proof of Income and Expenses from January 1, 2018, to September 30, 2018. Because of this, the Trustee was not able to complete the review with the information supplied and, therefore, is unable to establish whether the Bankrupt has surplus income payment requirements as per section 68 of the Bankruptcy and Insolvency Act, R.S.C 1985, c. B-3 (“BIA”);
4. On the initial Statement of Affairs, the Bankrupt failed to disclose to the Trustee that he had previously owned a 2000 Cigarette Top Gun Boat;
5. The Bankrupt did not disclose the transfer of a custom Chopper motorcycle for $1.00 and did not supply documents to allow the Trustee to review the transaction; and,
6. The Bankrupt did not supply complete information documentation to allow the Trustee to review the transaction for the property at 5894 Longhearth Way, Manotick, Ontario.

b) Trustee’s Amended Report

[6] The Trustee submitted an amended report dated December 7, 2018. In that report the Trustee notes the following:

1. The Bankrupt fulfilled his obligations to the Trustee. The Trustee subsequently received a payment of $1,600.00 on November 21, 2018;
2. Upon review of the surplus income requirements, the amount payable to the Trustee may change.
3. The Bankrupt provided his income tax returns for 2016 and 2017, which included his net salary and his spouse’s gross annual income. The Bankrupt also provided bank statements and his spouse’s bank statements for 2018. The Trustee was not able to complete the review with the information supplied and not able to establish whether Mr. Berthiaume had surplus income requirements as per section 68 of the BIA.

[7] The Trustee continued to note that the Bankrupt did not disclose the 2000 Cigarette Top Gun Boat or the transfer of the custom Chopper motorcycle for $1.00 and did not supply the Trustee with documents to allow the Trustee to review the transaction.

Opposition to Discharge by Scott Lafrange and Graham Wheatley

[8] Scott Lafrange is a mortgage broker in Ottawa who was friends with Mr. Berthiaume and who lent him money.

[9] Graham Wheatley was the accountant for Mr. Berthiaume and Mr. Berthiaume’s bankrupt company.

[10] Mr. Lafrange and Mr. Wheatley filed a joint opposition to discharge (“Opposition to Discharge”). Both Mr. Lafrange and Mr. Wheatley are creditors of the estate who have filed claims that have been accepted.

[11] They filed a Notice of Opposition to Discharge for the reasons as set out by them:

1. “The debtor Troy Berthiaume works currently for his spouse’s company and would potentially not be disclosing all of his earnings, his potential earnings would be of $3,200.00/bi-weekly;
2. The debtor Troy Berthiaume would have been in possession of an engagement ring, value of approximately $15,000.00-$20,000.00 when he filed for personal Bankruptcy;
3. The debtor Troy Berthiaume would have transferred a custom chopper of a value of $30,000.00-$40,000.00 in his father-in-law’s name before his personal Bankruptcy. At the time of the transfer, Mr. Berthiaume did not owe any money to his father-in-law and the bike was free and clear.
4. The debtor Troy Berthiaume was the owner of a boat with a co-owner before his personal Bankruptcy;
5. The debtor Troy Berthiaume transferred a 2012 Dodge Ram 1500 that was in his personal name to his father around March or April of 2014, at the time of the transfer, Mr. Berthiaume did not owe any money to his father and the vehicle was free and clear of any liens;
6. The debtor Troy Berthiaume was the owner before his Bankruptcy of an RV, which he transferred to his fiancée Alexandra or to Alexandra’s father without payment. The RV was subsequently sold in Florida to a third party for the amount of $50,000.00;
7. The debtor Troy Berthiaume sold a lift to “Adam” in October 2014 for a cash amount of $30,000.00 (value of $55,000.00) The lift did not belong to Mr. Berthiaume, he created a bill of sale and would have received this money;
8. The debtor Troy Berthiaume was a shareholder of Troy Berthiaume Masonry (Ottawa) Inc., and he did not disclose on his statement of affairs owning the shares of this company; a. Troy Berthiaume Masonry (Ottawa) Inc. owned equipment (value of $50,000.00) and Mr. Berthiaume would have sold the equipment without giving the funds to the company. b. Troy Berthiaume Masonry (Ottawa) Inc. owned a lift (value of $30,000.00) and Mr. Berthiaume would have sold the equipment without giving the funds to the company.
9. The debtor Troy Berthiaume took a trip to St. Martins to purchase a diamond ring to propose to his girlfriend after he sold a ‘lift’ (Zoom Boom) which he did not own, created a bill of sale and sold for cash to Adam;
10. The debtor Troy Berthiaume had a wedding in September of 2016 for a large group at the Museum of Nature in Ottawa;
11. The debtor Troy Berthiaume was dishonest with the value of his boat; value of the boat was $110,000.00. He sold the boat on paper for $32, 276.58 to Seaway Motors Inc., and received cash for the difference. He claimed the engines were blown, but he just had them rebuilt for $15,000.00. Troy had this boat before his personal Bankruptcy.
12. The debtor Troy Berthiaume took a trip New Year’s Eve 2015-2016 after he proposed to his girlfriend in Mexico;
13. The debtor Troy Berthiaume leases a truck for $1,500.00-$1,800.00 a month, wasn’t disclosed in Bankruptcy;
14. The debtor Troy Berthiaume completed 3 cash jobs, $10,000.00 (River Road), $15,000.00 (Balmoral Drive) and $30,000.00-$40,000.00 (Cedar View, this money went towards his boat), using company employees but did not give any money to company.
15. The debtor Troy Berthiaume, Troy Berthiaume Masonry (Ottawa) Inc. owes Scott Lafrange $174,134.00 (loan) plus payments and interests since 2012, this was not disclosed.”

[12] While the Creditors have laid out numerous reasons for the Opposition to Discharge, the court will only focus on certain matters.

Submissions of the Parties

[13] The Trustee argues that it is not able to properly determine the Bankrupt’s surplus income under section 68 of the BIA.

[14] The Trustee believes that because the husband works for his wife’s company that they are both earning an income that should have been disclosed to the Trustee.

[15] In addition, the Trustee says that as a mason with 16 years’ experience, the Bankrupt should be earning more than $16.50 an hour, considering that the minimum wage is $15.00 an hour.

[16] The Opposing Creditors argue that the Bankrupt has been concealing assets and that he should pay monies to the estate as a condition of his discharge.

[17] The Bankrupt argues that he is working as a mason earning $16.00 per hour, that he disclosed all of his financial information as requested, and disclosed all of his assets. He argues that this is his first bankruptcy and he has learned his lesson and should receive a discharge from his bankruptcy.

Non Payment of Trustee Fees

[18] The bankruptcy fees of $1,600.00 were not paid from September 1, 2015, until November 21, 2018, when they were finally paid in a lump sum. This payment made approximately 18 days before the discharge hearing in this matter. Prior to that date, the Bankrupt provided 4–6 cheques, all of which were returned for non-sufficient funds.

9278846 Canada Inc. and Bankrupt’s Income

[19] After filing for bankruptcy, the Bankrupt began working for 9278846 Canada Inc. (“9278846”), which is a company owned by Alexandra Ninclaus, his former fiancé and now his wife. According to the Trustee, Ms. Ninclaus works as a strategic planner for a local company and earns approximately $50,000.00 per year.

[20] At the date of bankruptcy, September 1, 2015, the Bankrupt declared that he was single. On January 1, 2016, he declared that he was living in a common-law relationship with Alexandra Ninclaus.

[21] The Bankrupt advised the Trustee that as of September 2016 he and Ms. Ninclaus had changed their status from being in a common-law relationship to married.

[22] The Trustee’s evidence is that in the income tax return filed in 2016 he declared his income to be $14,520.00, while his income for 2017 was declared at $10,560.00, both times or that he was working for 9278846.

[23] The Trustee testified that the Bankrupt’s current monthly net income after tax is $1,058.00 or $12,696.00 per year in 2018, again while working for 9278846.

[24] When the OSB examined the Bankrupt, he provided evidence that his income was in the range of $70,000.00–$80,000.00 in the three years prior to bankruptcy.

[25] The Bankrupt provided a recent employee cheque history that shows that his current gross pay was $1,320.00 with his net pay being $1,089.23. The pay period in question is for eighty hours of work in a two week period. On that basis, he was earning $16.50 an hour as an experienced mason.

[26] The court notes that Mr. Berthiaume is working for his wife’s company and is earning far less than he would if he was working for an arm’s length third party.

[27] The court finds that where individuals work for relatives or their income is controlled by relatives, the court may impute income to the Bankrupt. In this case, the Bankrupt works for his wife’s company and his income has decreased by 75–80 percent of his pre-bankruptcy income.

[28] Therefore, the court will exercise its authority and impute income to the Bankrupt of $70,000.00 per year for each of the years 2016, 2017, and 2018 (Saran (Re), 2018 ONSC 6045).

Surplus Income

[29] The court has prepared the calculations of the surplus income based on the Bankrupt’s imputed income of $70,000.00 per year and the wife’s income of $50,000.00 per year.

[30] This is a first time bankruptcy and the surplus income calculations would be for 21 months with the bankruptcy having occurred in September 2015.

[31] On that basis, the court, using the surplus income calculations based on Directive 11R2 of the Superintendent of Bankruptcy, calculates the monthly surplus to be $1,314.60 for 21 months or a total of $27,606.54. The calculations are attached here to Schedule “A”.

[32] In the event that there is an error in the mathematical calculation of surplus income, the court is to be advised in writing within 15 days, failing which the court’s calculations will be accepted.

[33] This amount is to be paid as part of the conditional order of discharge.

Troy Berthiaume Masonry (Ottawa) Inc.

[34] Mr. Wheatley testified that through his office, a company called Troy Berthiaume Masonry (Ottawa) Inc. (“Non-Bankrupt Company”) was incorporated on May 11, 2012, in Ontario. A copy of the first page of the Certificate of Incorporation was provided. The Non-Bankrupt Company is not to be confused with T. Berthiaume Masonry Ltd., the Bankrupt Corporation.

[35] Mr. Wheatley provided a copy of the Non-Bankrupt Company’s shareholders register in which Mr. Wheatley is shown as the owner in trust of 85 common shares.

[36] Mr. Wheatley then produced a copy of the Declaration of Trust, dated May 11, 2012, which states that he owned 85 common shares of the Non-Bankrupt Company in trust for the Bankrupt. Both Mr. Wheatley and the Bankrupt signed the Declaration of Trust.

[37] Mr. Wheatley also provided a list of accounts payable of the Non-Bankrupt Company as of April 30, 2015.

[38] He also provided a copy of the Non-Bankrupt Company’s income tax return for the period ending April 30, 2014, showing a business number of 818253304. That tax return included a Schedule 100, which listed assets of the corporation for the year-end of April 30, 2014, in the amount of $238,204.00.

[39] Mr. Wheatley testified that in May 2015, the Bankrupt took assets out of the Non-Bankrupt Company and sold some.

[40] The Bankrupt said that he knew nothing about the Non-Bankrupt Company. He claimed that the signature that appears on the Declaration of Trust is not his.

[41] The court has compared the Bankrupt’s signature on the Declaration of Trust with other documents signed by him and finds that it is very similar. The court finds that Mr. Berthiaume did sign the Declaration of Trust.

[42] The court has reviewed the Bankrupt’s Statement of Affairs in which he lists his liabilities, one of which is for director’s liability to the CRA for account number 818253304 with a liability of $50,041.85. Therefore, based on the Bankrupt’s admission in the Statement of Affairs that he owed money to the CRA in relation to the Non-Bankrupt Company, the court finds that the Bankrupt had full knowledge of the Non-Bankrupt Company and did not disclose his interest in it to the Trustee.

The Motorcycle

[43] Both the Trustee and the Opposing Creditors opposed the Bankrupt’s discharge on the ground that the Bankrupt did not provide information of the transfer of a custom Chopper motorcycle (“Motorcycle”) for $1.00 and did not provide the Trustee with documents to review the transaction.

[44] The Office of the Superintendent of Bankruptcy (“OSB”) also noted after its examination of the Bankrupt that the Motorcycle information was not provided to the Trustee.

[45] Mr. Lafrange gave evidence that the Motorcycle was transferred from the Bankrupt to his now father-in-law Daniel Ninclaus, on November 22, 2014.

[46] A Declaration/Receipt of a Specified Vehicle Transfer from the Ontario Ministry of Finance was introduced in evidence showing the transfer of the Motorcycle for $1.00 with a payment of retail sales tax of $0.13. It indicates that the vehicle may have been mechanically unfit.

[47] Mr. Lafrange had knowledge of the Motorcycle because he testified that he and the Bankrupt use to drive motorcycles together in the past.

[48] The Bankrupt’s evidence is that he did not disclose the transfer of the Motorcycle on his initial Statement of Affairs but did disclose later on.

[49] The Bankrupt’s evidence is that the Motorcycle was in his name, but Mr. Lafrange stole the Motorcycle from him and that the Bankrupt took it back.

[50] He testified that Mr. Lafrange and someone else who owned a motor vehicle dealership transferred the registration for the Motorcycle out of his name. Mr. Berthiaume said he stole the registration back and sold the Motorcycle to his future father-in-law in November 2014 for $5,000.00.

[51] In his evidence, that he advised the Bankruptcy administrator about the sale of the Motorcycle to his father-in-law for $1.00. He did not disclose to the Trustee that he received $5,000.00 for the Motorcycle.

[52] The court finds that in light of the Bankrupt’s evidence that he received $5,000.00 for the Motorcycle, that the Declaration/Receipt to the Ministry of Finance about the sale price of the Motorcycle was false. The court notes a warning printing in bold on the Declaration/Receipt which reads as follows:

the purchaser’s agent is responsible for the accuracy of the declared purchase price, which is subject to review by the Ministry. In addition to any unpaid tax, the retail sales tax act provides for a penalty equal to the unpaid tax plus interest on the total amount.

[53] The court orders the Trustee to provide a copy of this decision highlighting these paragraphs to the Ministry of Finance Retail Sales Tax Branch.

[54] The court finds that while the Bankrupt may have disclosed the sale of the Motorcycle, it is clear that he did not do so in his initial sworn Statement of Affairs. It may have been disclosed later on, but only after creditors began asking questions.

[55] The court finds that the Bankrupt did not mention the Motorcycle in his Statement of Affairs, notwithstanding the fact that the Statement of Affairs requires information in relation to transactions up to five years prior to the date of bankruptcy.

[56] Lastly, the court finds that he did not disclose that he sold it to Mr. Ninclaus for $5,000.00 and that he was not truthful about this transaction with the Trustee.

2000 Cigarette Top Gun Boat

[57] The boat in question is a 2000 Cigarette Boat (“Boat”). The Boat was initially leased by the Bankrupt on July 13, 2013, from Sprucewood Leasing Ltd. who subsequently sold it to Seaway Motors Inc. on March 3, 2016, for $32,276.00, inclusive of HST.

[58] The Bankrupt testified that he disclosed the lease and seizure of the Boat to one of the Trustee’s employees. At some point in time, the Bankrupt disclosed the seizure of the boat but only after the Statement of Affairs was signed and filed. The Bankrupt says that he advised the Trustee’s representative that creditors had seized the boat and that the Trustee’s representative said that it was nothing to worry about.

[59] The Trustee testified that the Bankrupt failed to disclose the Boat in his Statement of Affairs.

[60] The court has reviewed the Statement of Affairs which is a document signed and sworn to be true by the Bankrupt. In the Statement of Affairs, he was specifically asked the question “had any property been seized by a creditor”. He answered “No”. Therefore, the court finds that the Bankrupt was not truthful in his answer about the Boat to the Trustee.

[61] As a postscript, photographs were provided by Mr. Lafrange of the Bankrupt with another boat. The Bankrupt gave evidence that his wife has bought a Searay boat in August 2018 and paid approximately $21,000.00 for the boat, part of which was financed. His evidence is that he is the one who drives the boat.

2005 Caterpillar Zoom Boom

[62] Mr. Wheatley testified that a piece of equipment, a 2005 Caterpillar Zoom Boom (“Zoom Boom”), was actually owned by Marvel Inc., and Mr. Berthiaume sold that asset personally to Adam Decristoforo for $30,000.00. He said that there is no registration for the Zoom Boom but only a bill of sale. A copy of the bill of sale for the Zoom Boom from the Bankrupt to Mr. Decristoforo dated October 27, 2014, was produced in evidence by Mr. Lafrange and was confirmed by Mr. Wheatley as being the bill of sale for the Zoom Boom.

[63] When asked about this, the Bankrupt acknowledged that it was his signature on the bill of sale. He testified that the Zoom Boom was stolen before the bankruptcy and, therefore, he could not sell it. In addition, he said he did not own the Zoom Boom.

[64] The court rejects the Bankrupt’s evidence in the face of the bill of sale with his signature and the evidence of the Opposing Creditors. The court finds that Mr. Berthiaume did sell the Zoom Boom for $30,000.00, whether he owned it or not, and did receive the monies.

5894 Longhearth, Manotick, Ontario

[65] In the Trustee’s Notice of Opposition to Discharge, the Trustee testified that the Bankrupt did not supply complete information and documents to allow the Trustee to review the sale of the property at 5894 Longhearth Way, Manotick, Ontario. At the discharge hearing, the Bankrupt testified that he had moved into the property in 2010 and moved out in 2014. He said he lived there with Ms. Ninclaus until they separated in December 2014. They got back together 6–7 months later and rented a house together on Vaughan Street in Ottawa.

[66] A copy of the property parcel register for the Longhearth property was provided that showed that the Bankrupt owned the property with Melissa Marie Repaci and Vincenzo Repaci. It was sold on June 5, 2015, for $865,000.00. The court has no information about how much equity was in the property.

[67] Evidence was provided by way of a letter from Greg Farnand, a lawyer, dated June 8, 2015, which reads, in part, as follows:

June 8, 2015 the Royal Bank of Canada 211 Centrum Blvd Orleans, Ontario K1E 3X1…RE: deposit to the account of Alexandra Ninclaus

Account number 02124512 1439

Our file B241-501

On behalf of our client, Troy Berthiaume, please find enclosed our firm trust cheque in the amount of $20,000.00 for deposit into the above referenced account.

[68] Mr. Berthiaume, in his Statement of Affairs, says “in July 2015 sold property located at 5894 Longhearth Way, Manotick, (Ontario) for $865,000.00, received $20,000.00 used to pay debt.”

[69] The court finds and the evidence is clear that the $20,000.00 went to his live-in girlfriend who later became his wife. The court finds that there is no evidence that the funds were used to pay the Bankrupt’s debts.

[70] The bankruptcy occurred on September 1, 2015, within three months of the Bankrupt having received the monies.

[71] The court orders that the Trustee take the necessary steps to investigate this transaction and take the appropriate action. In the event that there are any other questionable transactions, the Trustee is requested to take the appropriate actions. The Trustee is ordered to report back to this court about such transactions.

Bankrupt’s Wedding

a) Engagement Ring

[72] The Bankrupt is married to Alexandra Ninclaus, who works full-time.

[73] According to the Bankrupt’s evidence, they became engaged in December 2015 and were married on September 17, 2016, at the Canadian Museum of Nature in Ottawa, Ontario.

[74] The Opposing Creditors gave evidence that the Bankrupt bought his wife an expensive engagement ring, which was valued between $15,000.00 and $20,000.00. According to the timeline, the engagement ring would have been given to Ms. Ninclaus around December 2015, which was after Mr. Berthiaume went Bankrupt in September 2015.

[75] The Bankrupt testified that the ring was only worth approximately $10,000.00 and that he did not buy it, rather it was a gift from Ms. Ninclaus’ mother to him.

[76] The Bankrupt said he gave his fiancé a fake engagement ring made of cubic zirconia. He said that he later replaced that ring with a real engagement ring which he said his mother-in-law gave to him as a gift. The Bankrupt then gave the real engagement ring to his fiancé, which he valued at $10,000.00.

[77] The court rejects the evidence of the Bankrupt of how he got the engagement ring. The story is farfetched and not believable.

[78] The court finds that the Bankrupt bought an engagement ring with real diamonds at some point in time, which he gave to Ms. Ninclaus after he had gone bankrupt. Whether he possessed it pre-bankruptcy or post-bankruptcy is not a factor. If he purchased it pre-bankruptcy, he should have disclosed it, which he did not. If he bought it after he filed for bankruptcy, he had to have the money to purchase it from somewhere, and that money was not disclosed to the Trustee.

b) Cost of Wedding

[79] The next aspect of the wedding was the cost. The Bankrupt testified that 88 guests attended at the Canadian Museum of Nature. The Opposing Creditors provided pictures of the wedding that were posted to social media, which the Bankrupt confirmed. When questioned about the wedding, the Bankrupt said there was an open bar. He said he did not pay for the wedding, rather Ms. Ninclaus’ mother paid for the wedding, and it cost approximately $25,000.00.

[80] The Bankrupt testified that the couple received about $17,000.00 in cash gifts, which were given to his mother-in-law. He also acknowledged that he borrowed money for the wedding and he was still paying it back. No details of how much was borrowed or how much is being repaid were put into evidence.

[81] The court finds that there is no evidence that the Bankrupt disclosed that he was repaying debts post-bankruptcy to the Trustee for the wedding. The court finds that Mr. Berthiaume’s incurred credit while being a Bankrupt, which is not an issue in and of itself, but he did not disclose his wedding debt payments to creditors to the Trustee, post-bankruptcy.

Vacations

[82] One of the Opposing Creditors, Mr. Lafrange, provided photographs posted to social media of vacations the Bankrupt took. The vacation pictures included the following:

a. St. Petersburg, Florida in March 2015 b. St. Martin on March 28, 2015 c. Playa Del Carmen, Mexico on December 28, 2015 d. St. Petersburg, Florida on February 9, 2016 e. Salt Lake City, Utah on February 11, 2016 f. European Holiday (including Greece, Rome, Venice, Capri), August 29–October 1, 2017 g. Mont Tremblant on March 25, 2018 h. Montreal on May 21, 2018 i. Boston in July 2018, j. Lake Nipissing on July 16, 2018 k. California in September 2018. l. The Bahamas in February 2019.

[83] When questioned about what trips were taken in 2019, the Bankrupt said that he had just returned from a five day holiday to the Bahamas taken during the week of February 2019.

[84] The Bankrupt testified that his trip from August 29 to October 1 2017, was his honeymoon.

[85] He also testified that the trip to Salt Lake City was his wife’s business trip.

[86] The Bankrupt testified that at least on one of these trips they stayed with family.

[87] The court cannot comprehend how a bankrupt who earns $16.50 per hour is able to take this many vacations while he is bankrupt. The court finds that the Bankrupt’s spending on vacations, notwithstanding that his wife is employed, is extravagant, totally inappropriate and mocks the integrity of the bankruptcy system. According to the court’s calculation, there were ten vacations taken from the date of bankruptcy to date.

[88] Based on the number of trips the Bankrupt has taken, one would never have known that he was in financial difficulty not to mention that he was Bankrupt.

Examination by the Office of Superintendent of Bankruptcy

[89] Throughout the administration of the estate, the Opposing Creditors provided information to the Trustee.

[90] The Trustee had concerns in relation to this Bankruptcy and referred the matter to the OSB. The OSB conducted an examination on August 15, 2016, and issued a report on August 17, 2016.

[91] At the OSB examination, the Bankrupt disclosed the following:

1. He had paid for an all-inclusive trip down south every year using credit. While he was taking these trips, his business was not doing well, and he needed to utilize cash advances from his credit cards to pay his employees and had difficulties making payments to creditors.
2. He neglected to inform the Trustee that he sold a custom Chopper motorcycle in 2014.

[92] While not opposing the discharge directly, because the Trustee already opposed it, the OSB found that the discharge could be refused, suspended or granted conditionally based on subsections 173(1)(a), 173(1)(e), and 173(1)(o) of the BIA.

Issue

Should there be findings under subsections 173(1)(a), 173(1)(e), and 173(1)(o) of the BIA?

Section 173(1)(a) – Assets not of a Value Equal to 50 cents on the Dollar

[93] Section 173(1)(a) reads as follows:

173 (1)(a) the assets of the Bankrupt are not of a value equal to fifty cents on the dollar on the amount of the Bankrupt’s unsecured liabilities, unless the Bankrupt satisfies the court that the fact that the assets are not of a value equal to fifty cents on the dollar on the amount of the Bankrupt’s unsecured liabilities has arisen from circumstances for which the Bankrupt cannot justly be held responsible.

[94] When the Trustee reports that the assets are not of a value equal to 50 cents on the dollar which was done in this case, then the onus shifts to the Bankrupt to satisfy the court that the failure has arisen from circumstances for which he cannot justly be held responsible. (see: Re Ferguson (1950), 30 C.B.R. 180 (Ont. S.C.); and Re Maguire (1984), 55 C.B.R. (N.S.) 9 (BC. S.C.)).

[95] The Trustee is relying on this ground to oppose the Bankrupt’s discharge. Therefore, the onus shifts to the Bankrupt to show that he has satisfied the onus in this subsection.

[96] The court did not hear any evidence as to how the Bankrupt had satisfied this onus.

[97] In various case law, courts have held that each case must be judged on its own particular facts (see: Re Lawless (1987), 65 C.B.R. (N.S.) 117 (P.E.I. S.C.).

[98] A review of the list of creditors claimed by him shows that numerous creditors are the Canada Revenue Agency either for unremitted taxes and or for director’s liability for taxes as well as other creditors.

[99] In this case, the court finds that the Bankrupt is not satisfied the onus. There will be a finding under section 173(1)(a) of the BIA.

Section 173(1)(e) Unjustifiable Extravagances in Living

[100] Section 173(1)(e) reads as follows:

173 (1)(e) the Bankrupt has brought on, or contributed to, the Bankruptcy by rash and hazardous peculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of the Bankrupt’s business affairs

[101] The Bankrupt had numerous items including a boat, which either returned or seized by the lessor. In addition, he had the Motorcycle, which he sold prior to bankruptcy, which he did not disclose.

[102] These findings indicate that the Bankrupt was definitely living beyond his means.

[103] Furthermore, in his examination before the OSB he stated that he would go down south every year on all-inclusive trips using credit. He acknowledged that at those times his business was not doing well and he needed to utilize cash advances from his credit cards to pay his employees and had difficulties paying his creditors.

[104] Based on these facts, the court finds that there will be a finding under section 173(1)(e) of the BIA.

Section 173(1)(o) – Failure to Perform Duties

[105] Section 173(1)(o) reads as follows:

173 (1)(o) the Bankrupt has failed to perform the duties imposed on the Bankrupt under this Act or to comply with any order of the court.

[106] The duties required of a Bankrupt are set out in section 158 of the BIA. The following sections are applicable in this situation: 158(d)(f)(g) of section 158.

[107] Based on the analysis set out below the court finds that the Bankrupt did not comply with the following subsections in section 158.

[108] Section 158(d) requires the Bankrupt within five days following his bankruptcy to prepare and submit to the Trustee Statement of Affairs and advise the Trustee of all of his or her assets.

[109] In this case the Bankrupt did not disclose the Boat either seized by the creditor, the Bankrupt having voluntarily given it up.

[110] In addition, the Bankrupt did not disclose the sale of the Motorcycle to his future father-in –law nor did he disclose his ownership in the Non-Bankrupt Company.

[111] Section 158(f) requires the Bankrupt to disclose to the Trustee of all of the property disposed of within the period beginning on the day that is one year before the date of the initial bankruptcy event or beginning on such antecedent date as a court may direct and ending on the date of bankruptcy and the consideration for the disposition.

[112] In this particular case the Bankrupts says that he disposed of his interest in the property on Longhearth Way and paid the money to the creditors. The evidence on this point is to the contrary and that he gave it to Ms. Ninclaus.

[113] In addition he sold the Motorcycle for $5,000.00, not $1.00 as he originally stated, to his now father-in-law within 12 months of bankruptcy.

[114] Section 158(g) requires the Bankrupt to make disclosure to the Trustee of all property disposed of by gift or settlement without adequate consideration within the period beginning on the day that is five years before the date of bankruptcy and ending on the date of bankruptcy. In this particular case the Bankrupt did not disclose the sale of the Motorcycle for $5,000.00.

[115] In addition he did not disclose that he paid the $20,000.00 from the sale of Longhearth to his then girlfriend who is now his wife.

[116] Based on the aforesaid the court makes a finding under section 173(1)(o) of the BIA.

What Type of Discharge Should the Bankrupt Receive?

[117] Based on the findings set out under section 172 of the BIA, the court can order a discharge in accordance with section 172(2) as follows:

a) refuse the discharge; b) suspend the discharge for any period that the court thinks proper; or c) require the Bankrupt, as a condition of his or her discharge, to perform any acts, pay any moneys, consent to any judgments or comply with any other terms that the court may direct.

[118] From the court’s perspective, the Bankrupt’s conduct in light of this very serious financial situation mocks the integrity of the BIA, which is a system that is supposed to help honest, but unfortunate debtors. The integrity of the bankruptcy system must be safeguarded from people who attempt to use the system to get away with inappropriate conduct such as in this case. The court finds that Mr. Berthiaume is neither an honest nor an unfortunate debtor.

[119] In addition, the court finds that the Bankrupt has the ability to pay monies to the Trustee for the benefit of his creditors based on his age, past conduct, his pre-bankruptcy earnings, and his ability to earn income in the future.

[120] The court takes note that the income of the Bankrupt’s spouse is a factor to be considered in directing if a conditional discharge should be made and for how much (see: McCamley (Re) (1982), 43 C.B.R. (N.S.) 66 (Ont. H. Ct.); and Baum (Re) (1988), 70 C.B.R. (N.S.) 263 (Ont. H. Ct.). In the present case, the combined income of the Bankrupt and his spouse exceeds $100,000.00 per year. That income does not include any expenses that are being deducted through the company that may be properly attributed as income.

[121] A fundamental purpose of the BIA is to provide for financial rehabilitation of insolvent persons (see: Ramgotra (Trustee of) v. North American Life Assurance Co., [1996] 1 S.C.R. 325 (S.C.C)).

[122] The integrity of the BIA must be maintained so that honest or an unfortunate debtors can obtain a discharge in order to make a fresh start and resume their place in the business community (see: Irwin (Re) (1994), 89 B.C.L.R. (2d) 114 (C.A.)).

[123] Based on the aforesaid, it cannot be said that Mr. Berthiaume, is an honest or an unfortunate debtor. He is not. At the very least, he misled the Trustee and his creditors about the numerous items, including his income, that assets were disposed of or transferred prior to bankruptcy and his extravagant lifestyle.

Conclusion

[124] Based on the aforesaid reasons, findings, and case law, in accordance with section 172 of the BIA, the court orders the Bankrupt to pay the following payments to the Trustee on a condition of his discharge:

a) surplus income in the amount of $27,606.54; and b) a further sum of $45,000.00; c) accordingly, the total amount owing on the conditional discharge is $72,606.54.

[125] These amounts are to be paid at a minimum rate of $500.00 per month from June 1, 2019, until completely paid.

[126] In the event the Bankrupt defaults in the payment of any five payments, whether consecutive or not, the Trustee shall apply for its discharge. Once the Trustee is discharged, the Bankrupt will no longer benefit from the stay of proceedings and any creditor having a claim against the Bankrupt will be able to resume collection action.

[127] Provided that the Bankrupt makes the payments as set out above, no interest will be charged. In the event that the payments are not made, interest will accrue on the outstanding balance at the rate of 5% per annum on the unpaid balance.

[128] While at first glance these conditions may appear harsh, the court considers them appropriate given the Bankrupt’s conduct and the circumstances of this case.

[129] This matter is to be case managed by Kershman, J.

Costs of the Opposing Creditors

[130] The Opposing Creditors were successful in the opposition to discharge. The court assesses their costs at $1,000.00. This amount shall be paid out of the estate in priority to all other creditors. These costs are not payable as an additional amount by the Bankrupt.

[131] Order to issue accordingly.

Mr. Justice Stanley Kershman Released: May 2, 2019